This column was originally published on Jeff Neal’s blog, ChiefHRO.com, and was republished here with permission from the author.

This is the second of a series of posts on civil service reform. My last post outlined the merit system principles and why I believe they should serve as the foundation of any reform efforts. Merit System Principle #3 says in part “appropriate incentives and recognition should be provided for excellence in performance” while #6 says “Employees should be retained on the basis of the adequacy of their performance, inadequate performance should be corrected, and employees should be separated who cannot or will not improve their performance to meet required standards.”

It would be hard to find someone who does not think it is critical that civil servants should do their jobs well. Likewise, it would be hard to find anyone who does not believe the government should deal effectively with problem employees and poor performers. In fact, federal employees have themselves been complaining for years that agencies do not take steps to deal with a poor performer who cannot or will not improve. They are the ones who have to carry the work that poor performers should be doing, and in the five most recent Federal Employee Viewpoint Surveys, only 28 percent or 29 percent agree that their agency is dealing with poor performers.

There has also been a lot of discussion in recent years about pay for performance, with proponents arguing it will incentivize good performance and punish poor performance. Opponents argue that pay for performance programs have a history of discriminatory outcomes and a tendency to reward people who are closest to the boss.

Failure to deal with poor performers and complaints about pay-for-performance programs remind us all how much virtually everyone hates the performance evaluation process. That problem is not limited to the federal government. As I have written before, people hate performance appraisals because they are designed to tell employees something they do not believe. Most people believe they are above average, while the objective of most appraisal processes is to put most employees in the middle rating (usually called fully successful or something similar). So, HR designs processes to tell most people they are average, while those very same people believe they are above average. That leads to an adversarial approach to performance ratings that does not do much to drive performance. On top of that, the performance rating process costs a fortune. I estimate that the cost of doing appraisals as they are now done is around $1 billion annually.

As much as everyone hates the process, there is still a lot of support for having pay be driven, at least in part, by performance. The Merit System Principles mandate recognition of excellence. Dealing with poor performers also requires some measure of what constitutes good or bad performance. That means any attempt at civil service reform must address the problem of performance ratings.

I believe we can do that, make the process better, eliminate the adversarial aspects of it, and save money at the same time. Here are 6 things we should do to make the performance process work:

• 1) Reduce rating levels to 2. Ratings should be simplified into a binary choice of satisfactory or unsatisfactory. An employee with an unsatisfactory rating should be given an opportunity to improve. If they cannot perform satisfactorily, they should be removed.

• 2) Decouple awards and pay incentives from performance ratings. Incentives, in the form of bonuses or pay increases, should be driven by specific, measurable accomplishments that significantly exceed what is expected. If we move to a market-based approach to pay (more info on that coming in a future post), most employees would receive increases based on market conditions. Those who accomplished far more than required could receive incentive pay. The number who get such pay increases would most likely be no more than 10-15 percent of the workforce.

• 3) Implement multi-source feedback for all supervisors. Exit surveys often show that employees leave organizations because of their supervisors. Sometimes it is because the supervisor simply does not have and never will have the right skills. More often, the supervisor just has not gotten the right training or is not aware of how he or she is being perceived by employees.Multi-source (sometimes called 360-degree) feedback helps with both problems. It allows organizations to identify supervisors who are struggling, intervene appropriately, and, if necessary, take them out of supervisory roles. At DLA we implemented MSF and were often surprised by the results.For example, we found that the bottom 25 percent of supervisors (as rated by their employees and peers) viewed themselves almost exactly the way the top 25 percent viewed themselves. The top 25 percent thought they were very good supervisors. So did the bottom 25 percent. The bottom group was oblivious to their effects on the organization.

  In some cases, we were able to help them improve significantly through training and development. In other cases, they were simply in the wrong jobs and we were able to place them in non-supervisory roles where they could be effective. None of that would have been possible without the knowledge we gained through MSF. One big lesson we took from implementing MSF was that proponents often encourage using MSF only as a developmental tool and not sharing the results with anyone other than the person being rated. We tried that at DLA and learned that it got in the way of trying to help the bottom 25 percent get better or get out of leadership roles.

• 4) Incorporate real employee development components in rating processes. The law governing employee performance management in the federal government says ratings are to be used “as a basis for training, rewarding, reassigning, promoting, reducing in grade, retaining, and removing employees.” The reality is that few agencies effectively couple the rating process with employee development. The time currently wasted on multi-level rating processes can be used far more effectively to focus on developing employee skills. Every rating discussion should be an opportunity to discuss the employee’s career objectives, their interests and what motivates them. Performance plans should include development plans as well and completion of the development objectives by both management and the employee should be reviewed at the same time as performance. Agencies should work with employees to help them develop their skills for both their current jobs and their career goals. Those that do so are far more likely to retain their top talent.

• 5) Include employees in the process. The law requires agencies to “encourage employee participation in establishing performance standards,” Office of Personnel Management regulations encourages agencies “to involve employees in developing and implementing their program(s).” Credible performance management programs require such involvement, both of individual employees and the unions that represent many of them.

• 6) Include agency performance metrics in the process. If an agency is suffering from performance problems it can still have employees who contribute far more than is expected. However, an organization that is struggling with performance should have to go a step farther to justify incentive pay.

These steps would make it much easier to run the appraisal process, by focusing on the most critical decision whether an employee should be retained or let go. The amount of time devoted to the process and the cost would be reduced. The stress for employees would mostly go away. In addition, bringing employees into the process for supervisor ratings would give workers a voice and senior managers a great source of information about what is really going on in their organizations.

Jeff Neal is a senior vice president for ICF International and founder of the blog, ChiefHRO.com. Before coming to ICF, Neal was the chief human capital officer at the Department of Homeland Security and the chief human resources officer at the Defense Logistics Agency.

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